Potential Reasons for the Global Car maker investing in a local Partnership with a company in Chennai, India.
There are many potential benefits as well as challenges that may accrue as a result of investing in global market in partnership with other a local firm. Those benefits depend on the global market entry strategies that the company that is contemplating global expansion intend use to penetrate the international market (Keillor, 2012). .The choice of an appropriate market entry strategy depends on the objectives that the company want to achieve from such Partnership as well as the rules and regulations of the country where the company want to venture. Therefore in this case, some of the reasons why global car maker may have opted to collaborate with a firm in Chennai, India market are because of some benefits that are likely to accrue. Those benefits may be discussed based on various modes of partnership such as joint ventures. Licencing a agreements and strategic alliances.
Benefits for International Business Partnership.
Partnerships are relatively easy to establish and operate, but firms entering into such partnership should take time when developing partnership agreement. This is crucial because it will enable members in a partnership to prevent complexities and conflict which may a rise in the future. Additionally through partnership, the global car maker may benefit from business synergy; this synergy may in turn provide the global car maker with a competitive business advantage over the other business operating in the same automobile industry (John., & Allen, 1998). This Partnership will further provide the global car maker with diverse opportunities to invest in different portfolios in Chennai, India and hence, the Global car maker will be in a position to diversify its business risk .The partnership will further promote technological sharing between the two firms and this will enhance the productivity as well as the quality of output additionally the partnership will create a wider market where the global car maker will sell its vehicles ,this will intern increase the profits of the company substantially (Keillor,2012).Exchange of culture will also take place between the two firms; this will promote business through proper understanding of each other way of doing things. This partnership may provide the global Car maker with an opportunity to obtain resource that the company may not be having at a cheaper price hence, reducing its operating cost substantially. The resources that may be obtained include; human resources, financial resources and Low materials at a subsidised cost than in the home market of the parent company (Lymbersky, 2008).
The Level of Control for the Company Using this Strategy.
In Partnership and strategic alliances, different kind of business relationship exist here; such as shared manufacturing, distribution alliances, marketing agreements as well as research and development arrangements. The level of control the company may have depend on the content of the agreement (Keillor, B. 2012).Essentially, in this form of partnership there is an equal control this is because, companies remain separate and independent from each other.Inorder to have effective control of this alliances, both parent firms should set smart objectives, in addition to setting smart objectives, the parent companies should provide support to the established partnership ventures.
Therefore, based on the above discussion, the global car maker may obtain some advantages by entering into partnership with the local firm, this is a according to Keillor, (2012).However, before getting into any partnership venture it is usually prudent to evaluate the potential benefits and the level of control the company would obtain in order to prevent occurrence of risk associated with such a ventures in the future.
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